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TheStreet Open House

Miss Chipotle & Panera's IPO? Here's Another Chance

NEW YORK ( TheStreet) -- You know the old saying, Third time lucky, right? Well, this might be the very definition of that with Friday's IPO of Noodles. (NDLS - Get Report).

The company had initially priced its IPO in the range of $13 to $15 a share, but announced on Tuesday that the range would be lifted to $1 to $17, showing that investor demand is high. The company was originally to raise $75 million from the IPO, based on $14 per share, in the middle of the original range.

Assuming Noodles prices in the middle of the higher range at $16 per share, proceeds will likely be in the $85 million dollar ballpark. This should help combat investors' main worry going into the IPO: Growth versus debt.

Some investors didn't seem to like that Noodles was planning on using $66 million from the IPO to pay down debt. Retiring debt is usually a good thing, but in this case, it doesn't mature until 2017, making some question why the proceeds wouldn't be used for growth instead.

Still, when you think of restaurant growth stocks, Panera (PNRA) and Chipotle (CMG) are likely the first that come to mind.

One of the first things investors might notice on inspection of each company's balance sheet, is that neither of them have any debt. Yep, zero long-term or short-term debt. So perhaps Noodles is making a good move by retiring debt now, even though it doesn't exactly have to.

Also, now that the given range has been raised, perhaps the company will be able to retire debt and focus on growth, something that would truly be dynamic for investors. After the debt is repaid, Noodles will have approximately $20 million in proceeds to put towards whatever it wants, again assuming it prices in the middle of the $15 to $17 range.

While young, the growth has been strong for Noodles, with earnings per share up 120% from 2010, where the company earned 10 cents a share, versus 22 cents in 2012. The company also increased its total store count from 255 to 327 in that time frame.

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